Even though state
government began shouldering a large portion of school funding after voters
passed Proposal A in 1994, districts in Michigan still receive thousands of
dollars per pupil from locally raised and distributed revenues. Major sources of
this local revenue include nonhomestead property taxes (limited to 18 mills),
primarily used for operating expenses; local property taxes for sinking funds
and debt-service payments, exclusively used for capital expenses; and in
certain districts, “hold-harmless” millages, primarily used for operating
purposes.[*],
[†]

From 2004 to 2010,
Michigan school districts’ local revenue per pupil increased on average in each
of the four major locales (see Graphic 4). City districts on average received
about 35 percent more from local sources in 2010 than in 2004, while town
and rural districts realized per-pupil local funding increases of
32 percent on average. In 2004, suburban districts on average received the
most local revenue per pupil, but by 2008, city districts on average surpassed
them and in 2010 received $3,771 per pupil — $187 more than suburban
districts.

Local revenue for Detroit Public Schools (the only district
in the large city subgroup) increased by 67 percent over this seven-year
period, by far the largest of any of the 12 locale subgroups.[‡]
However, DPS received the least ($2,555) of the subgroups in per-pupil local
revenue in 2010, just as it had in 2004 ($1,531). The midsize suburban
subgroup, which had the highest per-pupil local revenue ($3,765) in 2004, was
the only locale subgroup where this funding decreased from 2004 to 2010,
falling by 3 percent.[§]

Overall, differences in per-pupil local revenue between
the four major locales decreased from 2004 to 2010. In 2004, the per-pupil
local funding gap between the highest and lowest groups — suburban and rural,
respectively — was $696; by 2010, the local funding gap between the highest and
lowest groups — city and rural, respectively — was $480 per pupil.[¶]

Interestingly, these findings “reverse” when the 12
subgroups are considered. The remote rural subgroup received the most per-pupil
local funding ($5,036) in 2010, and DPS, the large city school district, the
least ($2,555). Moreover, the local funding gap between highest and lowest
subgroups actually increased from $2,234 per pupil in 2004 to $2,481 per pupil
in 2010.

Graphic 4: School District Revenue per Pupil From Local
Sources by
Locale Group, Michigan, Fiscal Years 2004-2010

[*] NCES provides a list of revenues that should be
reported as local in the NPEFS. Ibid., I-4, I-5. Not all of the revenues
included there may apply in Michigan.

[†] For a detailed discussion of these taxes, see
Olson and LaFaive, A Michigan School Money Primer: For
Policymakers, School Officials, Media and Residents (Midland, MI: Mackinac Center for Public Policy,
2007), 23-31. The state’s 6 mill property tax, known as the “state education
tax,” is not included under local revenues. Michael Van Beek, phone interview
with Glenda Rader, assistant director, Michigan Department of Education, May
20, 2011.

[‡] See Appendix B, Graphic 29. This increase is
partly due to DPS’ having lost a significant number of students, yet still
receiving local property tax revenues that are not tied to pupil enrollment.